After a decade of bank failures and savings-and-loan bailouts nationwide, one might wonder why there is such a fuss about these two? The answer is that, unlike the others, they are strictly a Pennsylvania problem.

In 1900, when Tobias Knoblauch, a wealthy businessman, started a bank in Reading, and when Philadelphian Michael Marian did the same at 4th and Fairmount avenues in 1919, banks tended to be private partnerships, and the personal wealth of a bank's owners served as security for its customers.

Knoblauch and Marian were founded to serve Eastern European immigrants, offering travel as well as banking services. They were similar in another way, too: Both managed to survive the Depression.

Many banks did not. Pennsylvania passed a law in 1933 prohibiting such ''private" banks, although those that still existed were allowed to remain.

The federal government also sought to restore confidence in the banking system by establishing the Federal Deposit Insurance Corp. (FDIC), which would guarantee the safety of bank deposits. Then, it was up to a mere $2,500; now, it's $100,000.

Banks had to be incorporated and observe certain standards to qualify for FDIC. Most former private banks - like Mellon, for example - complied.

And, indeed, by 1992, only four of the 287 banks operating in Pennsylvania were still private partnerships.

One, New York-based Brown Brothers Harriman, is an investment bank that protects its few consumer deposits by pledging assets. The remainder were Knoblauch, Marian and the Bank of Landisburg, which is in Perry County, northwest of Harrisburg.

An investor group headed by Wendell Ehinger and Peter Stanley had bought Marian, which was still on Fairmount Avenue, in 1973.

In 1976, Hugh Kenworthy III, W. Thomas Tither Jr., John C. Tuten and William R. Dimeling bought Knoblauch and opened an office at 1631 Chestnut St.

The new owners of the banks had the same target market in mind - and it wasn't immigrants. They sought the well-to-do by offering greater personal service.

"When we make an auto loan, it is to finance a Jaguar or Mercedes," Tither said in a 1984 interview. "We don't finance Chevys."

In 1978, the state Legislature passed a law requiring all banks to insure deposits. Knoblauch, Marian and Landisburg met that requirement by contributing to their own insurance fund: the Pennsylvania Deposit Insurance Corp. (PDIC) which had neither the standards nor the financial reporting requirements of the FDIC.

But for a time, all was well.

WHEN THE TROUBLE BEGAN

Then came the go-go 1980s. State bank examiners realized that Marian and Knoblauch were in trouble in 1989 and began issuing directives about increasing capital reserves and doing something about troubled loans. They ordered Knoblauch's directors to cut back on such expenses as leasing Mercedes-Benzs and BMWs for bank officers.

And when, the following year, they found that the situation hadn't improved, they issued more directives - followed the next year by still more.

Why didn't Hargrove warn depositors that Knoblauch's and Marian's finances were deteriorating? Because, she said, announcing that a bank is in trouble only guarantees more trouble because depositors withdraw their money.

Why not step in sooner? Why weren't these banks treated like a fellow who ignores his car loan and very quickly finds himself in need of the subway?

"We don't want to close banks," Hargrove said. "The officers made representations that indicated they were trying to remedy problems. We gave them the benefit of doubt." She contends that many banks do the same for lagging customers.

By 1992, however, it was clear that Marian was insolvent and Knoblauch was close to it. It was also clear that the $4 million in the PDIC wouldn't be enough to cover what was owed to Marian's depositors alone, much less provide security for depositors in the other two banks.

The Bank of Landisburg, being financially sound, solved the problem by incorporating and qualifying for FDIC coverage. But the FDIC wouldn't touch Knoblauch or Marian. And no other bank wanted to buy them and take on their bad loans.

Hargrove said she considered liquidating them, but that would have denied depositors access to their money for years until the legal issues were resolved.

So, in April of last year, she opted to have the state take them over, using the $4 million in the PDIC plus a $26 million investment from the State Workmen's Insurance Fund. The fund provides worker's compensation to employers who cannot obtain it through private insurance.

That move kept the banks open and guaranteed all deposits up to $100,000.

The state had no legal obligation to guarantee a dime since PDIC was not a state agency. But Hargrove said she felt a moral responsibility.

She contends the insurance fund will eventually be able to sell the re- organized banks for a profit and the taxpayers will not have to pay anything.

ACCUSATIONS AND LAWSUITS

Not all depositors thanked Hargrove for her efforts. Many with accounts bigger than $100,000 have sued her. Some think they should have gotten the $4 million in PDIC. Some claim they'd still have all their money if Hargove hadn't taken over their bank.

She is also being sued by the partners of Knoblauch, who say the seizure violates state law.

More than a dozen such suits have been filed.

Hargrove has filed suits of her own against the partners of Marian and Knoblauch, seeking to have them ante up personal funds to cover the bank debts.

Marian's partners have been sued for "careless and negligent" mismanagement, including ignoring department of banking directives.

Knoblauch's partners are accused not only of negligence but also of deliberate violations of the banking code, including making loans to each other on excessively generous terms. Hargrove claims the Knoblauch partners used the bank as "if it were a fund for their personal use."

On only one point about this mess can all agree: No one will be able to start a bank the likes of the Knoblauch or Marian in Pennsylvania anytime soon.

Whatever else can be said of the former owners of those institutions and the state secretary of banking, together they have brought an era in Pennsylvania banking to an end.